Equity’s New Clothes?

Law360, New York (January 29, 2007, 12:00 AM EST) -- The story is familiar. There once lived an emperor who was quite an average ruler, but a world-class clotheshorse. Two swindlers told the emperor they could make a wondrous suit of clothes from the most beautiful cloth. This cloth, they said, was special. It was invisible to anyone who was too stupid to see it.

The emperor then allowed himself to be dressed in his new “special” suit for a procession through town. Of course, all the townspeople wildly praised the magnificent clothes of the emperor,...